China's Booming E-Commerce Market

China's new found prosperity is trickling down to a variety of sectors. Everything from manufacturing to financial services is seeing its star shine as its burgeoning middle class demands a host of modern conveniences. Its consumer story is just beginning and could be one of the biggest investment opportunities of the decade. However, one subset of firms stands to benefit from the populous nations new online shopping addiction. For investors, honing in on China's booming e-commerce and Internet market could be the key to playing the Asian Dragon's consumer story.

Bigger Than the United StatesBoasting more than 420 million plus Internet users, China has the ability to become the world's largest online shopping and entertainment markets. Between 2007 and 2009, online retail sales in China increased about 117% annually, and currently more than 145 million Chinese citizens have taken to online shopping. In 2010, these people spent roughly RMB 460 billion. That's just shy of the 170 million online American shoppers. However, recent projections by Boston Consulting Group (BCG) have the nation becoming the most valuable e-commerce destination within four years.

BCG estimates that China will add around 30 million new online shoppers a year for the foreseeable future, as Beijing has heavily subsidized high-speed broadband Internet. By 2015, the average shopper within the nation will spend nearly $1,000 and that e-commerce will reach 7.4% of total retail sales by 2015. There are plenty of reasons for the growth aside from the nation's newly found wealth. First, unlike the U.S., where we might use Amazon (Nasdaq:AMZN) to buy a toaster cheaper than in a brick and mortar store, many online shoppers in China buy things that can't be found in physical stores. A new logistics network throughout the nation is making shipping these parcels also less costly. Perhaps most importantly, crackdowns on fraud and counterfeiting within the nation have expanded trust among the average Chinese consumer. BCG's estimates of 44% of all urban citizens shopping online by 2015, seems certainly plausible given the advances. For more information, see Is Online Shopping Killing Brick-And-Mortar?

Chinese Internet domination isn't just stopping with shopping. The nation is becoming a hot bed of online gaming and social media. Consuming online content like streaming movies, music and games is becoming more commonplace, and BCG estimates that more than 40% of Chinese Internet users read or post product reviews online. Overall, China's Internet story is just getting started.

Investing in China's Internet BoomGiven the size of China's population, the online shopping revolution within the nation could be huge. For investors, this could be a great opportunity to play the nation's consumer story. The Guggenheim China Technology ETF (ARCA:CQQQ) can be used as a broad play on the theme. The fund tracks about 37 different Chinese tech firms such as C2C giant Alibaba.com (OTCBB:ALBIY) and Internet content firm NetEase.com (Nasdaq:NTES). So far, the exchange-traded fund (ETF) hasn't performed as great as some its other Chinese focused peers, but the future could make the fund a good bet. Likewise, with its similar ticker symbol, the Global X Nasdaq China Technology ETF (Nasdaq:QQQC) could be used as well.

Dangdang Inc. (NYSE:DANG) represents one of more interesting Chinese picks. The firm operates as an e-commerce website selling books, music CDs and DVDs within the nation. The company recently reported that its general merchandise revenue increased over 210% year over year. However, given the recent accounting issues facing several Chinese firms, investors may be more comfortable investing in an American firm. Wal-Mart (NYSE:WMT) has recently made inroads into Chinese e-commerce through a controlling stake in Chinese shopping firm Yihaodian. This gives Wal-Mart valuable access to the firm's large logistics network and strong sales. For more information, see Investing In China.

The Bottom LineChina's rapidly growing consumer story is spreading to its e-commerce sector as well. Given the nation's huge population and growing Internet adoption, it may be prudent to add exposure to the sector. The previous picks along with travel booking site, Ctrip.com (Nasdaq:CTRP) make ideal selections to play the trend.